Category: Individual & Economic Liberty

Exclusive Interview: William Thomas, Author of the new book ‘Radical For Capitalism’

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As a fan of Ayn Rand and her book Atlas Shrugged, I am continually trolling the web for new and interesting reads about her work. It’s here that the new release “Radical For Capitalism: An Introduction to the Political Thought of Ayn Rand” by William R Thomas popped up on my radar screen.

Thomas is the Director of Programs at The Atlas Society, a non-profit organization that through Rand’s work promotes open Objectivism: the philosophy of reason, achievement, individualism and freedom. He is the main contributor to the best-selling book Myths About Ayn Rand, and has published essays on political, ethical and epistemological topics. He has also spoken in various parts of the world on the theory of individual rights as well as Ayn Rand’s philosophy of objectivism.

I recently had the opportunity to interview Thomas on a short list of topics of interest to liberty-minded individuals. Here are a few of his thoughts:

On Why He Wrote Radical For Capitalism

It was originally written for a large compilation of writings called The History of American Political Thought. This book essay is primarily written for a reader who is not familiar with Ayn Rand or Libertarian thought.

And The Book’s Title

The title is a reflection of how Rand described herself. Yes, she believed in laissez-faire and a free society, but Rand was at the same time very thoughtful of the cultural and philosophical underpinnings that all of this required.

On Capitalism And Rand’s Relevance To Modern Times

I wanted this book to appeal to contemporary readers and say to them that there are certain fundamental values that they really ought to have on their radar and to consider. My goal was to write this in an academically respectable way, without sounding like a raving nut from some fringe group. In terms of its applicability to modern times, I hope that readers come away with a recognition that the left/right political dichotomy doesn’t make sense; that the cultural ideas underlying those two sides are disjointed.

On Rand’s Controversial Philosophies Regarding Individualism

Rand believed that it is the individual who matters. In other words, YOU ARE WHAT MATTERS….. Your life is to make of it what you will. Anyone who tells you that whatever your background is determines you; anyone who says that you’re defined by some trait you had nothing to do with, now that’s injustice. Martin Luther King believed that people should be judged by the content of their character. Ayn Rand dreamed of the same thing.

On Supreme Court Justice Clarence Thomas And His Love For Rand’s Work

I have a very positive view of Justice Clarence Thomas and his principled jurisprudence. Many criticize him as simple-minded, but he’s not. He’s just principled. Sadly, Justice Thomas has been slandered and attacked because he was identified as a black conservative. The left just went after him tooth and nail, but I think he’s done a nice job on the Supreme Court. He’s been sort of a quiet voice for reason. That’s been really positive.

On How Rand Defined Capitalism and Selfishness

For Rand, “capitalism” was defined as a “free market economy.” Rand spent her life trying to rescue capitalism and the free market from it’s attackers. She had a rhetorical tendency to try and grab a term that a lot of people took as negative and, if she thought its real meaning was positive, she would take that term and use it to beat her opponents. She did that with selfishness too. Her book The Virtue of Selfishness was very controversial for that reason. She knew her readers would look at the word “selfishness” and immediately cast it as an oxymoron. Her view was that “selfishness” meant a concern for one’s own interests, pure and simple.

AynRandOn Her View Of Big Business

Rand thought that big productive businesses and industrialists, the kind lionized in Atlas Shrugged, were being attacked as inherently corrupt and evil. When Rand said that she was for capitalism, she meant that she was for industry. She championed world-changing creations. Apple Computer is a modern day example of this capitalistic spirit.

On Radical For Capitalism’s Value For Innovators and Young Creators

After reading this book, I sincerely hope that innovators and creators will recognize that they don’t have to apologize for creating something and that they are not robbing anybody. They shouldn’t be ashamed of their productive achievements and their desire to make money; for this is an honorable and a great thing. They should be principled in defending their acts and the effort that was required to achieve them.

Michael Scott is a liberty-minded blogger located in Denver, Colorado. More on the book Radicals For Capitalism can be found on Amazon

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The Chinese Stock Market is a Bubble

China Finance and marketThe figures and stories on China’s stock market keep getting higher and crazier. The Shanghai index is now up over 140% in the past year, while the Shenzhen Index is up 185%! Among the slightly more than 1,700 stocks on the Shenzhen Index, only a mere five have declined this year; and individual stock rallies of more than 500% “are not unusual.”

IPOs in China are so hot that recently a company seeking $2 billion attracted bids totaling $273 billion, virtually equivalent to the entire economic output of Hong Kong. Further, shares of the 144 firms that went public this year have averaged a return of 539% so far.

Valuations are looking frothy as the Shenzhen index now trades at approximately 44 times projected earnings, compared to the Nasdaq’s current 23 and the MSCI World Index of 17. The entire market capitalization of the Shenzhen index is now $4.7 trillion, surpassing the U.K.’s entire stock market value.

What’s driving the index to these nosebleed levels? It doesn’t appear to be fundamentals or an improving Chinese economy; rather, it is individual investors opening new brokerage accounts and trading on margin.

Newly opened brokerage accounts have spiked in recent months, while margin financing (borrowing money to trade) has also gone parabolic. A recent Bloomberg story recounted a 28-year old office worker in northern China who travelled 1,000 miles to set up an account in Hong Kong in order to get cheaper trade commissions and lower margin finance charges saying, “I can make more money if I can borrow more.”

Perhaps Chinese citizens have just gotten stock market fever and are getting caught up in the euphoria. Alternatively, it also appears the Chinese government actually had a direct role in creating this hysteria. Last August the state-run media started urging the Chinese public to put their savings into stocks, “espousing the wisdom and patriotism of owning equities.” The government has also reduced fees and now allows individuals to open 20 accounts instead of only one.

But that begs the next question, namely, why does the government want its citizens in the stock market so bad? According to Anne Stevenson-Yang of J Capital Research, a Beijing-based research group, there are two main reasons. First, a bull market will allow heavily indebted firms, many of them state-owned, to swap out debt for equity which they won’t have to pay back.

The second is to provide an alternative to the sagging Chinese property market. It wasn’t too long ago that Chinese savers and investors were stashing their wealth into empty apartment buildings, trying to earn a return or at least keep their principal safe as they didn’t trust the banking system. But the real estate bull market has run its course and now they are turning to the stock market as an alternative.

This is the unfortunate outcome of a country that continually tries to centrally plan economic growth and inflate its economic statistics. Instead of allowing real wealth producing activities to take place, which is messy and takes time and hard work from entrepreneurs, the Chinese government bounces from inflating one asset to the next in order to juice GDP numbers. Chinese citizens are then forced to play the same game in an attempt to preserve their wealth and earn a return on their money.

Chris Kuiper, CFA is currently a student and researcher at George Mason University pursuing a Master’s of Economics. His previous experience includes asset management, investing and banking.

Where is the Inflation?

Money_falling_from_sky_inflationLegendary investor Warren Buffett recently admitted that he was wrong on interest rates, noting at the Berkshire Hathaway annual shareholders meeting, “It is so hard for me to believe that you can drop money from a helicopter and not have inflation, but we haven’t.” Many like Mr. Buffet are wondering the same thing. After dire predictions of the coming inflationary tsunami from sound money advocates, where is inflation?

When most people talk about inflation, they mean a general rise in the level of prices, usually measured by the CPI. After bouncing between 1-2% for the last few years, the CPI has recently made a dramatic downturn and has even posted a small negative year-over-year rate for March. But as many of our readers know, the true definition of inflation is literally inflating the money supply – the general rise in prices is merely a symptom or consequence of this.

Using this definition, we see that the money supply is indeed being inflated by a number of measures. The M1 money supply (cash and checking) continues its march upward, still growing around 10% per year; M2 (M1 plus savings deposits) shows similar constant growth, but growing around 6% per year. But if we have established that the money supply is growing, why haven’t general consumer prices risen?

If consumers did receive a “helicopter drop” of money in their front yard, we probably would see an almost immediate increase in prices as they would go out and bid up goods and services with their new money. But the growth in the money supply we have seen is done through a different channel. When the Fed engages in things like QE, it doesn’t send regular citizens a check in the mail; rather, it buys government bonds and lowers interest rates.

So if newly created money is going to financial assets, we would expect to see increases in those assets as well as interest-ratePicasso_inflation sensitive assets, not in the prices of consumer goods and services that the CPI measures. Not surprisingly, this is exactly what we find. Publically traded stock valuations are at all time highs, private company valuations are ballooning, and bonds yields are at record lows with forty-five percent of the world’s government bonds yielding less than one-percent, and many even showing negative yields (which means their prices are at record highs.) When he was chairman, Bernanke noted that higher stock prices will create a “wealth effect” as consumers will be wealthier, helping to increase confidence and therefore spending. Unfortunately, only fifty-five percent of Americans own stocks. As stocks and bond valuations get frothy for the wealthy, we would then expect money to start flowing into other assets to preserve wealth. Art is one example of this, which has recently been on a tear; this past week a Picasso sold for $179 million, a new world record. Real estate is also seeing a boom and price surge in the ultra-luxury markets.

So to see where the inflation is, one only needs to look at where the newly created money is going. Yes, general consumer prices aren’t running away (except for healthcare and tuition expenses, but that’s another topic); however, prices of assets that are affected by QE and low interest rates certainly are. Remember, the CPI didn’t go to the moon during the last housing bubble either, staying around 3% even though house prices and the stock market were bid up.

Finally, it is also helpful to remember the true definition of inflation because today’s definition can mask a lot of small but constant inflation. For example, if entrepreneurs can find a way to deliver a product to consumers for five percent less than the current price, the consumer benefits. Yet if inflation causes the price to increase back to its former price, the CPI will register 0% inflation, yet there is indeed a loss of purchasing power here.

Keeping the true definition of inflation in mind reminds us how and why asset bubbles can form and also why inflation will continue to erode standards of living and the need for personal wealth preservation.

Chris Kuiper, CFA is currently a student and researcher at George Mason University pursuing a Master’s of Economics. His previous experience includes asset management, investing and banking.

Crowdfunding Regulation Cools Down

Better late than never…

Crowdfunding has the potential to be “the people’s Wall Street;” but the SEC worked out the final rulemakings of the JOBS act, set to address the regulatory environment for equity crowdfunding platforms. Last month, the SEC took another small step in addressing this, issuing final rules on “Regulation A+.” This has been creating a buzz in the investment community as the new rules are set to go into effect starting June of this year.Vector crowdfunding concept in flat style

To review, “crowdfunding” is the concept of raising money for a business, project or product through small amounts from a large amount of people, rather than big chunks of money from only a few select backers. Crowdfunding is best known for getting music albums, movies and gadgets to the market through popular sites like Indiegogo and Kickstarter. However, these platforms only allow people to receive products in return for their financial backing, not shares of equity, because current securities regulations do not allow it.

The JOBS act, signed into law April 2012, was set to address this issue. Another piece of this legislation has now been outlined through the SEC’s final rulemaking on “Regulation A+.” Regulation A was a little used exemption in the securities regulation that allowed companies to raise up to $5 million; but since they still had to comply with all federal and individual state disclosure agreements, the prohibitive compliance cost was too high relative to the amount that could be raised. The new Regulation A+ will allow companies to raise up to $50 million by selling securities to the general public. The other big change is that it is likely individuals will not have to be “accredited investors” (which means they are wealthy) to participate. It also pre-exempts all of the individual state “blue-sky” laws making it much easier and cheaper to comply.

This is certainly a step in the right direction as it removes legal barriers and reduces compliance costs for small businesses and startups whose capital is especially precious.

laws_piggy_bankWhile certainly a welcome development, it has taken the SEC years to get to this point of merely amending an already existing federal exemption rule. Rules for Title III of the JOBS act, which are particularly targeted at equity crowdfunding, are not yet complete. Unfortunately for small businesses, they must continue to wait which leads to opportunities lost and jobs not created. While the SEC and others may want to protect small investors from losses and scams, it is ironic that people can currently choose to risk their savings in a host of other ways, such as gambling (including state sponsored lotteries no less!), yet when it comes to making investments they cannot be trusted. Rather than taking a precautionary approach where citizens, entrepreneurs and investors need permission for any new financial innovation, the SEC and others should let people experiment on their own, letting them succeed or fail in the process. When unleashed, entrepreneurs have given us incredible innovations in a host of areas in our lives, financial markets and capital raising should be no different.

Chris Kuiper, CFA is currently a student and researcher at George Mason University pursuing a Master’s of Economics. His previous experience includes asset management, investing and banking.

Micronations of Liberty

Micronations of LibertyMicronations

First there was Galt’s Gulch (aka Mulligan’s Valley or Atlantis), the secluded community in Ayn Rand’s novel Atlas Shrugged. Founded by fictionalized banker Midas Mulligan, this community was populated by a group of spirited revolutionaries spurred on by the book’s capitalist working-class hero, John Galt. Readers of Rand’s prolific tone remember Galt’s Gulch as the hidden refuge where America’s most forward-thinking creators, industrialists and inventors sought community amidst an American society that had fallen prey to collectivism and government overreach. It is through this experimental culture that Galt sought to promote a transactional community of voluntary exchange, devoid of laws and regulations that hinder foundational principles of freedom and liberty.

Fast forward to 2015 where we could be witnessing a derivative of Galt’s vision, as exquisitely captured in Rand’s book. Known as “micronations,” these developments function as independent nations, states, or even just communities free of the restrictive controls of a central government. In a fully idealized form, these independent milieus might establish a dedicated currency system, community mission and other elements codifying their functional ecosystem.

Liberland Abound

Within libertarian circles, media attention is in full buzz around Liberland, a new micronation situated on a 2.7-mile swath of unclaimed territory between Serbia and Croatia. Originally done in jest as a publicity stunt, this proposed nation-state is now attracting a groundswell of interest, garnering nearly 250,000 citizenship applications over a short period of time from all parts of the world.

Liberland was officially codified on April 13, 2015, by acting President Vit Jedlicka and a couple of other Czech libertarians. Symbolically, this date was intended to align with the birthday of one of America’s founding fathers, Thomas Jefferson. The purposeful intent of Liberland: To embrace the principle of limited government in alignment with voluntary taxes and public services. And according to Jedlica, no, Liberland will not be joining the European Union.

The hope is that Liberland will evolve over time into a libertarian utopia, with a population of 35,000, which would place it in the same category as Liechtensten, another small European state. State decisions will be made by referendum, embodying the philosophy of direct democracy and electronic voting. In lieu of a traditional tax system, the citizenry will be privy to an autonomous decision-making process that allows them to determine how much they want from the state and what they are willing to cough up in terms of money to pay for it.

By Land and By Sea

TaxesThere are also vast bodies of water worldwide being coveted by independent nation enthusiasts seeking to carve out new vistas of freedom and liberty. Perhaps the most ambitious initiative in play is currently fueled by the Seasteading Institute, founded in 2008 by libertarian activists Wayne Gramlich and Patri Friedman, with the aim of erecting autonomous communities on floating platforms situated in international waters. Interest in this concept mushroomed after word that PayPal founder and venture capitalist Peter Thiel was a major backer.

According to the institute, as well as micronation advocates, these free market floating cities are the next big thing, with predictions of these communities taking shape in the next five years.

The “Live Free or Die” State

New Hampshire has always been somewhat of an odd duck among  the U.S. States. But amidst its majestic landscapes and beauty is a micronation initiative that has been showing momentum for some time. Known as the “Free State Project,” a migration of libertarians is taking place in this New England state, and they are intent on fueling a state of unencumbered freedom,

On tap are some lofty ambitions targeted by or before the year 2035: reducing government debt by one-half as well as government employment by 15 percent; the legalization of marijuana and prostitution; abolishing smoking bans; ending sobriety checkpoints; rolling back unnecessary regulation; impacting free enterprise; reducing incarceration rates and tax burdens to among the lowest in the U.S; facilitating the end of victimless crimes, among others.

The Glendale, Colorado Experiment

Quietly nestled within the mile-high City of Denver, Colorado, is a home rule municipality that is engaged in a quasi-micronation experiment. In the village known as Glendale, Mayor Mike Dunafon has a grand vision of transforming this 4,100 person community into the “go-to” destination for freedom lovers across the world.

According to Dunafon, decisions related to how the city is run are predicated on a philosophy or principle which upholds the freedoms and liberties of the individual. Here, the goal at every City Council meeting is to take at least two often obscure laws off the books that unduly target and punish its citizens or even visitors to the area.

Whether in Glendale or in an obscure part of the world where a new micronation community is sprouting up, the goal is to deregulate our lives through limited government and voluntary exchange. As Dunafon is quick to point out, very few, if any, laws are truly needed for people to govern themselves and act like reasonable, civilized people.

Harkening In The New Gults Gulch?

Irrespective of whether Liberland and other micro nation experiments succeed at their quest, this movement reflects a liberty-oriented consciousness that’s catching fire across the globe. Here questions abound:Freedom Land

Why are such onerous laws restricting our liberty still in vogue from days gone past?

Why are we so hemmed in by taxes that serve as barriers to individual initiative and free enterprise?

And what about our privacy rights?

And what about our freedom to use money as we see fit as long as we are not harming others?

Can’t we just live our lives as free human beings?

These questions and more are all spurring interest in autonomous, experimental enclaves where libertarian ideas can be beta-tested a la Galt’s Gulch. Moreover, they suggest growing interest in the principles of freedom and limited government as the new normal for a free society that works for all.

Michael Scott is the Founder and Principal Barista with Bookmark Global Connect, Inc a firm committed to creating collisions between authors and readers one book at a time. Find out more at http://allthatbookjazz.tumblr.com